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US payrolls come back with a surprise

  • The Payrolls report was broadly strong, in line with a view of a still resilient labour market: employment bounced back from last month’s weakness and was well above consensus, while the unemployment rate inched higher to 3.7% (3.6 in May), due to an increase in the labour force participation rate (up from 62.9% from 62.8%). Hourly earnings growth is moderating but remaining near this cycle highs.
  • According to the simulations by the Atlanta Fed, the current 3 month average growth rate (177k), if sustained for 12 months, ceteris paribus could ensure the convergence to a 3.2% unemployment rate. Conversely, the current 3.7% unemployment rate is sustainable with an average payroll growth of slightly above 108k.

The numbers:

  • US payrolls were up 224k in June, above market expectations of 160k, reverting the weakness of May (only 75k, revised down to 72k).
  • The report was particularly strong as all sectors added jobs, with only Natural Resources and Mining declining by 1k.
  • Major contributor or the increase were both the private and the government sectors.
  • The Private sector, added 191k jobsof which:
    • The Service Sector +154k ( notably Education & Health +61k, Professional & Business +51k, Trade, Transportation & Utilities +20k)
    • The Goods Producing Sector +37k ( Construction +21k, Manufacturing +17k)
  • The Government Sector added 33k jobs, mainly at local administration level (+29k).
  • Average hourly earnings growth was a bit lower than consensus and continued along gradual softening trend from the cycle-high reached earlier this year. Interestingly to notice, the moderating trend is mainly driven by the softening of hourly earnings in the service sector (which anyhow remain above average) while the goods-producing sector hourly earnings keep trending up (albeit still remaining below the average). Within the service sector, above average growth in hourly earnings is recorded for the Information, Leisure and Professional& Business sector (yet, all moderating). Within the goods producing sector, outperformer is the mining sector.
Graph-US-Labor-market
USARDI Annalisa , CFA, Senior Economist
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US payrolls come back with a surprise
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